The Chancellor’s Budget party piece marginally pre-empted Halloween this year. So did we get a Thriller or a Monster Mash (-up) of a Budget?
Well, given that some commentators believe we are on an economic Highway to Hell, there was at least a little trepidation in the air. Did Spreadsheet Phil deliver a trick, a treat, or a bit of both?
Before considering that, it’s worth noting that a Budget in October is unusual. However, there are two main reasons why this was the case this time around.
The first is we are now in the new cycle of Autumn Budgets and Spring Statements, with the first Spring Statement delivered on 13 March.
If the pundits are to be believed, the second reason is down to politics. Philip Hammond reportedly wanted to get the Budget process underway before the next round of parliamentary battles over Brexit began again in earnest.
However, this Budget was always going to be a holding affair. Not only is it the final one before Brexit, it is also the last before the 2019 Spending Review is published. This will set out government expenditure for 2020/21 and, if the normal pattern is followed, the following two financial years, taking it beyond the theoretical date of the next election.
For all the uncertainty, Hammond had a better economic background than expected.
The better than forecast borrowing numbers, due primarily to lower than projected spending, may appear to have given the Chancellor welcome wriggle room.
However the Prime Minister effectively re-applied the straight jacket with her summer promise of £20bn a year extra for the NHS by 2023.
So, what did emerge from such a constrained Budget? Well, a very ebullient Chancellor (with more than a little ‘toilet humour’) presented a Budget to very deliberately position the Conservatives in stark contrast to the Opposition. It almost had a ‘pre-election’ feel to it.
He made it clear this government and the Conservative party was to be trusted to “end austerity but continue to apply discipline”, going on to add: “Fiscal Phil says fiscal rules ...OK!”.
All of that said, the key changes of direct or indirect relevance to financial planners are as follows:
- The personal allowance and the higher rate threshold will increase to £12,500 and £50,000 respectively in 2019/20, a year earlier than promised in the Conservatives' manifesto
- A consultation of trust taxation reform (with the emphasis on simplification) will be launched
- Technical changes to the residence nil rate band but no other inheritance tax reform
- Capital gains tax (CGT) annual exemption up to £12,000
- Isa allowance stays at £20,000 (Junior Isa is increased by CPI inflation)
- CGT main residence relief conditions changed a little in relation to lettings relief
- No major pensions changes, other than the lifetime allowance increasing to £1,055,000 and some proposals (largely already known) in relation to cold calling – a huge relief all around
- Some changes to entrepreneurs’ relief – predominantly extending the qualifying period to a minimum of 24 months
- Off payroll working changes to be extended to the private sector
- A further extensive package of targeted anti-avoidance measures
It is worth noting the Chancellor made it clear that if the economic position changed materially over the next few months (no prizes for guessing what could cause this to happen) then next year's Spring Statement could be upgraded to a “full fiscal event”. In other words, another Budget.
You can download Technical Connection's Budget report here, which focuses on changes and consultations announced in the Budget speech and supporting papers and what they mean for advisers and their clients. The report also includes an appendix setting out the 2019/20 tax rates and allowances, and an appendix listing relevant consultation documents.
Tony Wickenden is running an Illuminate masterclass which will provide a thorough debrief of Budget 2018, as well as a discussion on tax planning opportunities for advisers, investors and business owners. You can find out more details and sign up here